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Now, Shell spars with IT dept, to challenge tax order

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New Delhi: Shell India said on Monday that it would challenge a notice by authorities alleging tax evasion by under-pricing share transfer between member companies on the ground that the order was based on incorrect interpretation of regulations.

Income tax department has charged Shell India of under- pricing a share transfer within the group by Rs 15,220 crore, and consequently evading taxes.

The tax evasion notice on Shell comes on the back of a Rs 11,200 crore tax notice on Vodafone on its acquisition of Hutchison Whampoa’s local mobile business in 2007.


At the centre of the latest controversy is a 2009 equity injection involving Shell India and parent Shell Gas in which Rs 87 crore worth of shares were issued at a value of Rs 10 per share, which the taxmen now claim was in fact worth Rs 183 per share.

“Tax evasion (reports) are baseless and Shell India will challenge this order strongly and is evaluating all options for redress,” Anglo-Dutch oil major Royal Dutch Shell Plc’s India unit head Yasmine Hilton said in a statement.

Shell vowed to challenge what it saw as a transfer pricing order that is “based on an incorrect interpretation of the Indian tax regulations and is bad in law,” arguing that the move is a capital receipt on which income tax cannot be levied.

“Taxing the money received by Shell India is in effect a tax on Foreign Direct Investment (FDI), which is contrary not only to law but also to the spirit of the recent global trip by the Finance Minister to attract further FDI into India,” Hilton said.

The statement said Royal Dutch Shell group has over the last few years made significant investments in India. Equity injection was used to finance these investments and to fund the ordinary business activities of Shell India.

Shell Gas BV was the only parent of Shell India before this equity issue and continued to be so after the issue. “The valuation of the shares was undertaken by a certified independent valuer who assessed the value (in line with the foreign investment and exchange control laws) to be below Rs 10 per share and the issue was made at  Rs 10 per share,” it said.

“The transfer pricing order has valued these at Rs 183 per share even though there are no provisions under the income tax law for such revaluation,” Shell India said. “As such the Royal Dutch Shell group intends challenging the order and will be evaluating all options for redress.”

Transfer pricing refers to the practice of arm’s-length pricing of transactions among companies, which are part of a group and spread across different countries.

Voda’s Analjit  meets FinMin

New Delhi: Vodafone India non-executive Chairman Analjit Singh met Revenue Secretary Sumit Bose in an attempt to resolve the Rs 11,200 crore tax liability issue related to the British firm’s acquisition of Indian telecom assets of Hutchison Whampoa. When asked if a resolution was in sight, Singh said, “…that is difficult to say. But we are willing and positive and that is why we are here.” Finance Minister P Chidambaram too had expressed confidence earlier that the government would find a resolution to the Vodafone tax issue.

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